When Women Invest in Other Women

This is the web version of raceAhead, Fortune’s daily newsletter on race, culture, and inclusive leadership. To get it delivered daily to your inbox, sign up here.

Today’s essay is a guest opinion piece by Ambika Singh, the founder of a women’s rental clothing startup. Read more about raceAhead’s call for essay submissions here.

Take it from an entrepreneur like me: Raising money is one of the greatest challenges in getting a startup off the ground. For female-founded startups, the fundraising playing field is particularly lopsided—so much so that anyone who values women’s economic advancement should pay attention. A recent report by the National Venture Capital Association and Pitchbook found that in the first half of 2019, investment in female-founded startups accounted for just 2.9% of total venture investments, only a slight improvement from 2.3% in 2018.

Women entrepreneurs can begin to close the funding gap for all by encouraging participation from investors who may have an easier time pattern-matching female CEOs to successful outcomes: other women. The increased participation of women investors may have positive effects beyond the companies they fund—if they’re intentional about how they invest. A 2018 study by Indiana University’s Women’s Philanthropy Institute about the donor habits of high net worth women found that women philanthropists have an eye toward driving systemic change through funding.

“Women can be powerful agents of change with their philanthropy, and their values and goals are often shaped by the societal experiences of being female,” says Elizabeth Dale, a professor at Seattle University, who worked on the study.

Likewise, women investors could choose to invest in companies and founders who strive to make systematic change in the for-profit arena, leading to better outcomes for individual consumers and communities who may have been overlooked by entrepreneurs unfamiliar with such challenges.

“Remember that you’re investing not just in the startup idea, but also what that startup’s success will bring to the world,” says Ruchika Tulshyan, a philanthropist, angel investor, and author of The Diversity Advantage: Fixing Gender Inequality in the Workplace. “For me, that looks like investing in a woman-of-color-led organization that makes life infinitely easier for working women, especially working mothers.”

So, for women looking to invest in women-owned companies, here are four things to consider:

Don’t be afraid to start small. Not all investors have to be hedge funds. Female-founded startups that face institutional barriers to traditional funding can represent great investment returns because of the lack of competition in the funding cycle, resulting in smaller amounts of capital translating into great returns for investors.
Do your research to find startups aligned with your values. What companies are solving social problems that matter to you and your community? What value does this company bring to the world? Find a startup that speaks to you. That way, even if you don’t see a return on investment as fast as you would normally like, you can still know the money is going towards bringing an important idea to life.
Consider pooled investments for lower risk. Organizations like SheEO offer a low financial commitment and pool women’s funds to support women-owned businesses around the globe. Portfolia Funds channels a $10,000 minimum investment into 10 high-potential entrepreneurial companies chosen by experts. Even if only one is a unicorn, your money still supports women entrepreneurs who are often creating high-paying jobs for fellow women.
Tap into your network or talk to other female angels for advice. As female entrepreneurs, CEOs, founders, and leaders, it’s our responsibility to empower the women around us, and on the flip side, be okay with asking for help when we need it. You never know who will have the knowledge you need to succeed, so ask questions. Resources like AngelList or the Angel Capital Association may be helpful in locating fellow angels in your area.

More women investing in for-profit ventures can increase the percentage of women receiving funding to grow businesses that might not have otherwise existed without her unique perspective. More women succeeding means more mentors, more torch-bearers, more examples to follow—and fewer boardrooms lacking in diversity. Like fundraising itself, changing the fundraising ecosystem requires hard work and grit, but creating an equal playing field for everyone is a mission worth fighting for.

Ambika Singh is the CEO and co-founder of Armoire, a clothing rental startup based in Seattle.

Tamara El-Waylly and Ellen McGirt co-created the raceAhead op-ed program; Ellen curated and wrote the blurbs in this edition of raceAhead.

On Point

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ESPN

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Fortune

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NBC Philadelphia

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FERN

On Background

The legacy of slavery persists in the U.S. health care system A recent event at Harvard, "400 Years of Inequality," sponsored by the Harvard T.H. Chan School of Public Health and Harvard’s FXB Center for Health and Human Rights, began with the grim statistics: The U.S. is one of only 13 countries in the world where more women die in childbirth today than they did 25 years ago, and Black women are three to four times more likely to die than white ones. And stereotypes about Black bodies (like pain tolerance) persist — and are direct legacies from slavery. "The inequalities of the health system were built in from the beginning," said Evelynn M. Hammonds, chair of the Department of the History of Science. "The history of the field you are studying makes no mention of this."
Harvard Gazette

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Workforce

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Beacon Broadside